Confidence & the Consumer

Download PDF Version

Much of the country saw spring come in like a lion, with continued cold temperatures, record snow depths, heavy rains, and mudslides. However, retail sales seemed to be only moderately impacted by these conditions. We actually saw improved performance in the luxury and department store sector and with a few specialty apparel retailers. We were all prepared for the Easter shift to April, but the more interesting aspect of the average performance throughout March was the impact of global economic factors on consumer confidence.

In the last two months, we have warned retailers of the impending threat of rising gasoline prices to consumer spending, along with ever-increasing commodity costs. These pressures continued throughout March, along with new issues such as the earthquake and tsunami in Japan, new turmoil in the Middle East and Northern Africa, and U.S. and local government budget crises. The impact of these and other issues, such as declining home sales, drove consumer confidence down in the U.S. for the first time in three months, as indicated in the chart below.

This is particularly true of the female shopper, who has been showing a willingness to open her wallet again. She has been driving strong performance in the women's specialty apparel and department store channels. Specialty women's apparel has seen average monthly comps of 11% since November (compared to a wider retail average of just over 3%). She has also responded positively to department stores' branding strategy tweaks, which has helped to stabilize this segment's performance—with average comps of approximately 4% since November. (Department stores did flatten out in March, but that's largely due to the comparison with a 13% increase last year.)

In the mass/discount channel, Walmart's struggles have pulled down the segment's overall numbers (to an average of -.2% quarterly same-store over the last four quarters). While Walmart has labored to drive comp sales, Target has seen more success. But perhaps the most interesting story is the continued success of the dollar stores, which have been hovering at right around 6% quarterly comps or better over the last year. This shows that even if people are willing to spend a little bit more money on the higher end of the spectrum, everyone loves a deal, especially amid continued economic uncertainty—and will take them where they can get them. 

Our advice to retailers is to continue to prepare for the challenging marketplace. By now, your forecasts should reflect the potential for lower sales and higher cost of goods throughout 2011. However, in the near term, we should be prepared to capitalize on an uptick in consumer spending due to the late Easter holiday in April. Leaders will be ensuring they can respond rapidly to trends seen in April selling as we head into the summer months. As always, our data pack of retailer and macroeconomic data is attached.

March 2011 Viewpoint on Retail Performance: Confidence & the Consumer

-Need file to link to for Full Sales Comp- Follow this link to download the AlixPartners Comp Sales Report for March 2011.